"We want to make a difference in a good way, not a bad way," Peterson said.

But what his brother-in-law found on a water bottle in Bellingham, Wash., about 20 miles south of the Canadian border, had him questioning why he was cutting back so much.

"I was so in disbelief that I kind of didn't want to believe it.," Peterson said.

"I set it back down on my nightstand, and the fine print was right there, and in my vision line, I saw Modesto. At first I didn't believe my eyes," Donnie Creekmore said.

Creekmore said he was travelling to Washington in June for his mushroom business when he bought some bottled water at a Walgreens. He noticed the label in his hotel room.

"Sure enough, I look closer, and it's bottled at the source in Modesto, California," Creekmore said.

The bottled water comes from Hydration Sources LLC, a company listed in a Modesto Industrial Park.

"I just stopped watering my lawn, my dad stopped watering his lawn. We were debating whether to grow vegetables this year, because everyone is trying to conserve water and immediately I thought here is this company making upwards of millions of dollars bottling water and sending it all over the country," Creekmore said.

The water itself comes from the same source as most of Modesto's tap water, the Modesto Reservoir.

The city estimates the company has bottled as much as 25 million gallons over the last year.

City officials said the bottling company is allowed to draw the water and is billed just like any other company in town.

"This is our ground water here in Modesto, and Modesto is almost unique in the valley for not over-pumping or over-drafting it's ground water," Mayor Garrad Marsh said.

Plant operators said 80 percent of their bottled water is sold in California, and almost all of the water they use is for human consumption.

The other 20 percent is sold in neighboring states.

A group called Sovereign California is hoping a ballot initiative they are now collecting signatures for will lead to a 5-cent tax per ounce to any water bottled from municipal sources.

The initiative will also require those bottles to be labeled "not drought friendly."

"Bottling water at all from California is what we are trying to deter," said Eveline Fisher, of Sovereign California.

But Marsh said despite the drought, the city is in better shape than neighboring communities when it comes to it's water supply.

"What they use in one year is less than what Modesto uses in half a day," he said.

Marsh said he is proud the city's water quality is so high that it can be bottled and sold.

Still, some residents question the logic of bottling water from here during a historic drought.

"They are taking water from one of the driest states and moving it up to one of the wettest states," Creekmore said.